Pembroke Real Estate, the property subsidiary of Boston-based mutual giant Fidelity, is in talks to buy 99 Queen Victoria Street in the City from WeWork's investment arm, CoStar News uncerstands, as it nears the complete sell off of London offices it bought during its rapid expansion in the 2010s.
The US company, advised by Cushman & Wakefield, has been seeking around £68 million, the same price it paid for the building in 2019. CoStar News understands that Pembroke is in talks to pay closer to £55 million for the building.
WeWork's Ark business began exiting much of its London office portfolio more than a year ago. Ark, a multibillion-dollar real estate investment business affiliated to the global coworking group, was a highly active player in UK and European markets at the end of the last decade. It had the ability to de-risk the occupational side of an investment opportunity by bringing in a WeWork flexible office or WeLive coliving scheme as its tenant.
The business bought a number of buildings, principally in London, from 2017 to 2019 in the lead-up to WeWork's high-profile failed first attempt to become a publicly listed company.
At the end of 2021 CoStar News revealed that Ark was in the process of agreeing a sale of 99 Queen Victoria Street with Cushman & Wakefield thought to be advising. The then-WeWork Property Investors bought the building from the State General Reserve Fund, an Omani sovereign wealth fund, for about £65 million, in 2019.
After a pause in the process last year, WeWork, via Cushman & Wakefield, began approaching select parties again at the start of this year. The agent has been targeting discretionary equity and therefore ruling out development managers who do not have 100% liquidity, according to a market source.
The building was single-let to Sumitomo Mitsui Banking Corporation, which had a lease break in 2021 to line up with its move to 100 Liverpool Street. WeWork committed to taking the space on SMBC’s departure but the building is being sold as a vacant possession opportunity.
In January last year Ark sold 120 Moorgate to Singapore investor Sun Venture for £148 million. CoStar News revealed the building had come to market in September 2021 for £147 million, in a significant test of investor appetite for WeWork-anchored product as it pursued a second attempt at a public listing. The company eventually went public at the second time of asking via a special-purpose acquisition company.
Ark is also in talks to sell Film House, 140 Wardour Street, part of its Film House development in Soho, to Hines for around £135 million. Newmark is advising Ark on the sale of the former headquarters of Nike in Soho, which Ark bought with a hotel scheme stapled to the asset.
The sales would mean Ark would retain sole ownership of one London property, 51 Eastcheap, which it occupies. WPI bought 51 Eastcheap for £47 million via receivers on behalf of City Site Estates in 2017 with vacant possession.
WeWork sold its 10% ownership stake in Devonshire Square last year. It owned the stake alongside a consortium of TIAA and Danish pension fund PFA Global Real Estate. The trio paid Blackstone £580 million for the complex in 2018, putting up £345 million of equity and taking £275 million of debt. The investment is in the process of being refinanced.
WeWork launched Ark with an initial $2.9 billion (£2.26 billion) to spend in May 2019. It used its previous move into real estate acquisition and management, WeWork Property Advisors, as its platform. WPA was an investment adviser affiliated with the coliving provider's parent company and Rhône Group that had been investing under the joint venture co-mingled fund WeWork Property Investors.
The investment arm is now called WeWork Capital Advisors or WeCap, and is understood to be 80% owned by WeWork and 20% by Rhône.
WeWork shares have continued to slide to record lows in recent days as two senior executives have left the global coworking business. The shares are at $0.20 as it seeks to ward off a delisting from the New York Stock Exchange because of the continued poor performance of its stock price.
WeWork and investment arm WeWork Capital Advisors did not comment. Cushman & Wakefield declined to comment. Pembroke was unavailable for comment.